Select Committee on Transport, Local Government and the Regions Memoranda

Memorandum by The Royal Institution of
Chartered Surveyors (EMP 55)

EMPTY HOMES

1. INTRODUCTION

The Royal Institution of Chartered Surveyors
(RICS) represents the views and interests of 120,000 chartered
surveyors worldwide covering all aspects of land, property and
construction. Under the terms of its Charter, RICS is required
at all times to act in the public interest.

We welcome this opportunity to submit evidence
to the House of Commons Select Committee on Transport, Local Government
and the Regions on the importance of empty homes particularly
as housing is critical to the success of the UK economy. The nation
requires good quality housing to be made available to encourage
and facilitate normal economic activities. To meet this need the
large number of empty homes needs to be reduced and brought back
into use.

Key Recommendations

(i) Government needs to develop a formal
strategy setting out targets to reduce the number of empty homes
and establish a benchmark against which government agencies and
local authorities can be required to act.

(ii) The role of the Empty Property Advisory
Group needs to be extended and made accountable to a specific
government minister.

(iii) Government funding needs to be prioritised
to favour those local authorities who achieve the targets set
out in their empty property strategies.

(iv) Government needs to clarify the position
regarding local authority use of data protection legislation in
relation to the promotion of the "well being" of their
area under the Local Government Act 2000 and set this out in formal
guidance notes to local authorities.

(v) The rate of VAT on refurbishment needs
to be reduced to bring it more into line with the rate of VAT
on new build.

(vi) Partnership Investment Programme (PIP)
funding should be extended to include residential schemes.

(vii) Bidding mechanisms to support projects
bringing empty local authority and Registered Social Landlords
(RSLs) homes back into use need to be overhauled.

(viii) Council Tax should be applied at the
same rate for both empty homes and those properties in use. Council
tax receipts should be ringfenced and linked to the empty property
strategy within that area.

(ix) Government should promote best practice
on the most efficient ways of securing ownership of and procuring
works in respect of composite groups of empty homes.

(x) Urban Capacity Studies guidance needs
to be reviewed to promote the re-use of empty homes.

(xi) Financial incentives should operate
to discourage empty homes.

2. DEFININGTHE
PROBLEM

The most recently available figures show that
there are about 760,000 empty homes in England alone[39].
This is greater than the population of Leeds, England's third
largest city. Importantly, this figure excludes empty homes in
Scotland, Wales or Northern Ireland and vacant commercial property.

Empty homes are an issue for three principal
reasons:

 There is a strong body of evidence
to suggest that areas which include significant pockets of empty
homes suffer from higher levels of crime and associated problems.

 There is a need to accommodate 3.8
million households within the UK over the period 1991 to 2016.
Empty homes have the potential to supply a significant percentage
of this target. Along with brownfield land, empty homes present
an important opportunity to avoid further pressures on greenfield
sites.

 By allowing 50 per cent Council Tax
relief to owners of empty homes, there is a lost annual income
to HM Treasury in the order of £75 million per annum[40].
In addition, empty homes represent a considerable wasted resource
to the UK in terms of the investment already made in constructing
them, the ongoing maintenance and security costs of keeping them
empty and the costs of bringing them back into use.

At the local level, about 200 local authorities
have now appointed dedicated empty property officers and/or framed
empty property strategies, although disappointingly there are
still a third of English local authorities which have made no
such commitment. For those that have, there are a variety of tools
available to them to encourage the re-use of empty homes, including
planning, Compulsory Purchase Orders and grant funding arrangements.
We welcome the DTLR's recent commitment to preparing a comprehensive
guidance note for local authorities on the most effective use
of these powers although these can only really be of use as part
of a wider strategic framework.

.

At this stage it is difficult to predict how
effective current and proposed measures at the national and local
levels will be in addressing the current level of empty homes.
Our experience would suggest, however, that they will not have
a marked impact because of the sheer magnitude of the problem,
combined with the lack of a clear integration of policies at both
national and local levels.

2. ADDRESSING
THE PROBLEM

(a) Setting a strategy

Homes become empty for a range of reasons in
a variety of locations at different times. As some homes are brought
back into use, others join the supply of empty properties. This
is a dynamic and not a static issue therefore no simple solution
to addressing the problem of empty homes exists.

However, the starting point must be for government
to recognise problems arising from empty homes and make a clear
and concerted commitment to address it. We recommend:

(i) A formal strategy should be devised by
the Government that sets out key targets to reduce the number
of empty homes and establishes a benchmark against which government
agencies and local authorities can be required to act.

(ii) The role of the Empty Property Advisory
Group should also be extended, and tasked with developing performance
targets and measures for local authorities.

(iii) The Empty Property Advisory Group should
be directly accountable to a government minister.

(iv) Empty property strategies should be
mandatory for local authorities, government departments and agencies
which own residential properties, including the NHS, MoD and Highways
Agency, and for Registered Social Landlords (RSLs).

These strategies should integrate with local
and regional community strategies and recognise that the implementation
of the objectives advocated by the Urban Task Force is critical
in achieving a reduction in the number of empty homes. It will
be important to monitor the implementation of effectiveness of
empty homes strategies in order to inform decision makers of progress
and to identify obstacles to returning vacant domestic properties
to occupation in particular areas.

To provide local authorities with an incentive
to carry out their empty homes strategies funding should be prioritised
to favour those who achieve their targets.

Local authority asset management arrangements
for commercial and non-residential operational property provide
a useful framework for establishing a suitable mechanism in other
authorities. The Housing Corporation has also piloted such an
approach in the London region.

(b) Delivering against the strategy

The Government needs to consider reforming a
number of existing policies if empty homes strategies are to be
effective. These reforms need to be framed to support the process
of bringing empty homes back into use, starting with identification
of empty homes, the reason they are empty, securing ownership
where appropriate, establishing project viability, obtaining appropriate
approvals (including planning consent), procuring works, identifying
purchasers or tenants and property management.

(c) Identifying empty homes

The principal mechanism through which local
authorities record and monitor the number of empty homes in their
area is through the knowledge of their officers and phone calls
from the public. Once they have identified the location of an
empty property, their ability to identify the owner depends upon
whether the property is registered and then on the quality of
information held by the Land Registry. This is clearly an unsophisticated
approach with the possibility many empty homes are unreported.

However, data to identify the number, location
and owners of empty homes already rests with local authorities
through their Council Tax collection function but releasing this
information has been hampered by the need to comply with data
protection legislation. Recent Counsel opinion has highlighted
that local authorities' duties to promote the "well being"
of their area under the Local Government Act 2000 overrides data
protection legislation allowing them to make use of this important
information source[41].
This position is, however, far from clear. The Government should
formally clarify this position, seeking appropriate legal advice,
and set this out within formal guidance notes to local authorities.
Overcoming this procedural barrier could be very helpful in identifying
the true quantum of empty homes and bringing them back into use.

(d) Securing ownership

In some cases, property owners will be reluctant
to bring their empty home back into use, either because they perceive
that the right market conditions do not exist or because they
lack sufficient funding. CPO powers enable local authorities to
take a proactive role in securing the re-use of privately owned
empty homes, although they can be cumbersome and take so long
to activate that the property deteriorates further in the meantime.
The RICS has previously made a number of recommendations supporting
earlier Urban Task Force recommendations on how to streamline
the CPO process. In particular the American experience of quick
take, essentially fast track CPO following non-payment of property
taxes, combined with the application of property taxes to the
owners of empty homes would seem to be a sensible approach.

(e) Establishing project viability

The Government has a potential influence in
several pivotal areas that could assist in making projects viable
identifying taxation and grant assistance. For example, proposals
regarding stamp duty relief in deprived areas may have an important
implication on empty homes. We recommend that the Government continues
to work to resolve current issues preventing the implementation
of this policy.

We welcome the Government's recent introduction
of changed VAT arrangements for long-term empty homes. However,
VAT policy continues to favour development on greenfield sites
over bringing empty homes back into use. This is at odds with
the Government's objective that 60 per cent of new residential
units should be on brownfield land or within empty property by
2008. We recommend that the rate of VAT on residential refurbishment
be reduced to bring it more into line with the rate of VAT on
new build.

Following more than 18 months of delays, the
introduction of Partnership Investment Programme (PIP) replacement
schemes represents an important watershed to regeneration grant
funding in England. However, the schemes currently only allow
the Regional Development Agencies to support schemes predominantly
for business use. In these terms it is generally going to be difficult
for private sector developers and property owners to secure PIP
funding for bringing empty homes back into use. We understand
that the Government is continuing to lobby the European Commission
to introduce a scheme to support residential schemes and we recommend
that it continues to pursue this route.

With respect to local authority and RSL owned
accommodation, a variety of grants exist in both cases to support
projects bringing empty homes back into use. However, increasing
budgetary pressures combined with complicated bidding requirements
make realising these difficult for local authorities, discouraging
their use for anything other than comprehensive regeneration projects.
We recommend that a review of the bidding mechanisms for these
projects is undertaken, overhauling them where appropriate to
facilitate a greater take up of the grants.

When making the decision as to whether to bring
an empty property back into use, an owner's view is generally
not only based on the viability of the re-use, but also the cost
of retaining the property empty. Removing any financial incentives
to keep property vacant would therefore impact on this decision.
In particular, the 50 per cent Council Tax relief applying to
empty properties is relevant. We recommend that as a minimum a
standard 100 per cent level is applied across the board to both
empty properties and properties in use.

Furthermore, in order to support local authorities'
empty property work we recommend that the additional Council Tax
receipts are ringfenced and linked to the empty property strategy
within that area. The emerging proposals for congestion charging
hypothecation provide a precedent for this approach.

(f) Obtaining approvals

It is important for plans at local and regional
level to drive through PPG3 policies in particular by ensuring
that sequential testing is happening at both a local and sub-regional
level to ensure that for example, authorities in Cheshire are
not developing greenfield sites before the regeneration of East
Manchester and Merseyside is substantially complete.

(g) Procuring works

Whilst many empty homes exist individually or
in small pockets, this does not mean that they cannot be addressed
in larger groupings. A number of examples of good practice highlight
how local authorities have secured ownership and procured works
on a composite group of empty homes within their areas, so making
the most efficient use of people and financial resources. Government
should promote good practice to local authorities within its emerging
good practice guidelines.

(h) Identifying purchasers or tenants

The ability to secure a purchase or tenant for
a refurbished empty home is largely dependent upon the market
forces prevalent in the area. The supply of and demand for accommodation
will be key in forming a price level which in turn will affect
the viability of bringing empty homes back into use. Although
the Government's influence over demand-side characteristics is
very limited other than at the macroeconomic level it does have
the potential to influence the supply side. In particular, current
Regional Planning Guidance (RPG) is failing to take a sufficiently
robust approach whereby individual local authorities are able
to apply a sequential test within their areas leading to prosperous
suburban authorities continuing to build on greenfield sites when
other areas of the region have ample brownfield supplies. We recommend
that the Government reviews RPG arrangementssee above.

In addition under the existing Urban Capacity
Study arrangements local authorities are not formally required
to consider empty homes when allocating the supply of land for
residential development within the plan period. The caution raised
above over the accuracy of empty homes figures also highlights
that for those that do there may be weaknesses in their methodology.
In essence therefore there may be too many allocated sites which
are easier to bring forward for development than empty homes,
discouraging developers to take unnecessary risks. We recommend
that the Government reviews and clarifies its guidance on Urban
Capacity Studies, coupled with the recommendations above regarding
access to Council Tax data to facilitate more accurate forecasts
of the level of empty homes.

(i) Property management

Alongside bringing empty homes back into use,
a key priority has to be to prevent re-occupied homes rejoining
the supply of empty homes and forestalling properties becoming
long term vacant at all. Current property management arrangements
would benefit from being overhauled to meet these objectives.
The creation of financial disincentives to leaving homes empty,
as addressed above, has to be at the heart of changes to government
policy. This needs to be coupled in the case of private rented
accommodation with better guidance and legislation where necessary
to allow local authorities, Registered Social Landlords (RSLs)
and private sector landlords to enforce strict notice periods
and requirements that tenants should allow viewings from prospective
tenants to avoid homes laying empty for any more than a minimum
transitional period. The Delft system in the Netherlands demonstrates
that this practice can work and regularly avoids vacancy periods
of more than four weeks.

4. CONCLUSION

The current level of empty homes represents
a considerable wasted resource to the UK. Addressing this problem
is not merely necessary, it is essential if the Government is
to deliver on its objectives of achieving social inclusion and
meeting the household projections without resource to major urban
sprawl. Current policy at the national level is fragmented and
fails to fundamentally address the gravity of the problem faced.
This perpetuates a fragmented approach at the local level.

Recent Government policy commitments on neighbourhood
renewal and regeneration are welcome, but the Government needs
to co-ordinate these policies with a drive to make use of the
existing stock of empty properties.